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Incentives for Long-Term Care

A long-term care partnership incentive is now available to consumers in states that have passed enabling legislation, under a new law signed by President Bush Feb. 8 as part of his Deficit Reduction Act to help reduce Medicare and Medicaid spending.

Consumers who purchase long-term care insurance policies in the partnership program would fully utilize their benefits prior to qualifying for Medicaid.

The incentive comes "because you can protect a level of assets equal to the size of the policy you exhaust on a dollar-for-dollar basis, should you eventually look to qualify for Medicaid," said Jerry Golden, legislative assistant for the American Council of Life Insurers (ACLI).

For example, if a consumer purchases a LTC partnership policy with $100,000 in benefits that are eventually exhausted, he

or she will have the ability to protect an equivalent amount ($100,000 of assets) before accessing Medicaid. Policyholders will have to pony up some money toward their nursing home or home care, though.

The partnership programs, which are active in four states, provide private LTC insurance with special access to Medicaid for those exhausting their insurance benefits, according to a December 2004 paper on the partnerships by the Retirement Security Project at the Brookings Institution.

At least 16 states have already passed enabling legislation, the ACLI notes. New partnership programs become effective at each state's discretion, as early as the first day of the first calendar quarter in which the state plan amendment was submitted to the Department of Health and Human Services. "We anticipate that most, if not all, other states will follow suit," Golden says.

In the four states with active programs

--California, Connecticut, Indiana and New York (see www.nyspltc.org)--more than 225,000 partnership policies